Fratelli Vineyards Uncorks Strong Q2 & H1 FY26 Performance Amidst Industry Headwinds

Fratelli Vineyards Limited, a prominent player in the Indian wine industry, has reported a resilient performance for the second quarter and first half of fiscal year 2026. Despite facing near-term headwinds in the broader wine sector, the company demonstrated strategic agility and innovation, particularly with its new Ready-To-Drink (RTD) segment. For H1 FY26, Fratelli recorded net sales of INR 83.4 crore, maintaining consistent year-on-year performance. The second quarter alone saw a robust 25% quarter-on-quarter growth, primarily fueled by strong demand in the luxury and super-premium wine categories. The company's gross margins remained healthy at 80% for H1 FY26, reflecting stable operational efficiency.

Operational highlights reveal a strategic focus on high-growth segments and market expansion. The luxury segment continues to be a stronghold for Fratelli, dominating with over 50% market share and achieving an impressive 18% year-on-year growth in Q2 FY26. This performance underscores the consistent demand for its flagship labels like J'NOON and Sette. The company also expanded its domestic footprint, entering Chhattisgarh and now operating in 29 states and Union Territories. Internationally, Fratelli broadened its reach into new export markets such as Australia, Mauritius, and Maldives, with exports contributing approximately 3% to total revenue in Q2, a notable increase from 1% last year.

Strategic Innovations Driving Future Growth

A key driver of Fratelli's recent performance and future strategy is the successful launch of Shotgun RTD in February 2025. This new vertical has shown remarkable traction, capturing a 6% market share within just six months and expanding its presence across 6,000+ touch points in 11 states. The company aims to further expand Shotgun's distribution to 15 states by the end of Q3 FY26 and expects the business to double next year. This initiative is strategically positioned to tap into India's growing wine RTD market, estimated at INR 500 crore, and appeal to Gen Z and millennial consumers.

Fratelli is also investing significantly in long-term growth initiatives. An upcoming capital expenditure of INR 100 crore is planned over the next 2-3 years, primarily allocated towards developing a one-of-a-kind ultra-luxury vineyard tourism property in Akluj, Maharashtra, and for brand building in the RTD segment. Work on the hospitality project is expected to commence in early 2026, with an anticipated opening in 2028. The company intends to fund this capex through a fundraise, signaling a disciplined approach to capital structure and avoiding further substantial debt.

Operational Efficiency and Sustainability Focus

Despite increased finance costs and depreciation due to recent capacity expansion and new asset commissioning, Fratelli's EBITDA saw a year-on-year increase of 0.4% in Q2 FY26. This improvement reflects the company's focus on operational discipline and efficiency initiatives. The company is also committed to sustainability, with 45% of the energy requirements at its Akluj Winery now met through a 520 kW solar power installation. This initiative is expected to generate annual electricity cost savings of approximately INR 50 lakhs, contributing to both environmental responsibility and cost efficiency.

Outlook and Market Positioning

Looking ahead, Fratelli Vineyards anticipates a 12-15% revenue growth for the current financial year. The company expects the temporary market disruption in Telangana to normalize by December 1, with minimal impact on the topline. New product launches, including a sparkling wine in the super-premium segment and a port-style wine in the value segment, are planned for Q3. Fratelli's management remains confident in the long-term potential of the Indian wine market, driven by increasing consumer interest, premiumization trends, and an expanding middle class. The company's integrated value chain, diverse product portfolio, and proactive strategic initiatives position it well to capitalize on these opportunities and reinforce its leadership in the Indian wine industry.